It all started when ...
I asked myself: “Why is my paycheck so small?”; “Where are my tips?"; and “Why am I paying other people’s wages?”
You work hard serving customers all day. You receive healthy tips for a job well done. Ah, the life. Then you find out your tips go into a “pool” and are being shared with others – dishwashers, cooks, and even the manager! Or, worse still, your tips are the only compensation you receive. The next thing you know you’re left with a paycheck that’s below minimum wage. Unbeknownst to you, your employer may be breaking the law.
If you work in a job where you "customarily and regularly" make more than $30 per month in tips, then under federal law you are considered a tipped employee and subject to special laws on minimum wage and overtime pay. Many states also have special laws for tipped employees. As a general rule, it's illegal for you to be paid solely in tips. You have to receive at least the minimum wage - be it paid entirely by your employer, or through a combination of wages and tips from customers.
Tip pools are commonly used to pay customer service staff, such as waiters, waitresses, busboys, and servers. Under federal law, an employer of a tipped employee is only required to pay $2.13 per hour in direct wages if that amount combined with the tips received at least equals the federal minimum wage. If not, your employer must make up the difference.
In order to take advantage of the tip offset provision under federal law, your employer must:
- inform you in advance about the tip credit allowance (including amount to be credited) before the credit is utilized;
- ensure that you receive at least the minimum wage when direct wages and the tips you receive are combined; and
- allow you to keep all tips, whether or not the employer elects to take a tip credit for tips received, except to the extent you participate in a valid tip pooling arrangement.
Illegal tip pools are rampant and employers often don't know the rules. Often, tips are shared with "back of house" staff, such as dishwashers and cooks. That helps your employer's bottom line, but hurts yours. When this happens, the law is very clear - you must be paid the full minimum wage by your employer, irrespective of the tips you receive.
Conway Legal are experts in parsing through the noise and telling you exactly whether your employer has abused the "tip" system. Call us for help - now that's a good tip!